Caution: Not All Living Trusts Will Avoid Probate

Many folks in California create living trusts to, among other reasons, avoid the hgh costs of a probate proceeding. Regretabably, some may think they’re saving money even more with do-it-yourself kits, Internet trusts, or by working with a paralegal or a general practitioner. If you go those routes, you increas your chances that your living trust may not avoid probate.

Why? Why Won’t my Living Trust Avoid Probate?

Good question. We get this question all of the time and are happy to answer. Yes, a well drafted living trust is designed to avoid probate. However, the trust only controls assets titled in the name of the trust (or made payable to the trust upon death such as life insurance and retirement plans.)

If you own any significant asset in your individual name, the chance of a probate or other expensive court-based proceeding greatly increases.

If you own any asset in joint tenancy (with rights of survivorship), the asset will avoid probate on the death of the first person to die, but not the last. Upon the death of the surviving owner, probate will likely be required.

You Must Fund Your Trust

The purpose of this article is to emphasize the importance of funding your living trust. You cannot stop once you sign the document and your estate planning attorney delivers the papers to you.

You must fund your trust.

This means that you must retitle the title of all of your assets into the name of the trust (and make the trust the beneficiary of your retirement plans, life insurance, and annuities.) While this may sound simple, there are a number of considerations to take into account in handling this critical assets. Well drafted living trusts, which you will not find from cut-rate trust sources, contain special provisions for the handling of, among other things, retirement accounts and life insurance.

Funding problems are just one of the many defects that we have observed in bargain basement trusts which foolhardy bargain hunters unfortunately fall prey.

If you have questions about funding your trust, you would be wise to seek the advice from an experienced and qualified estate planning attorney. Your estate plan and avoiding probate depends upon accurate funding.

Timothy P. Murphy is an estate planning and elder law attorney whose practice emphasizes helping people to build, preserve and pass on their wealth. He works with his clients to accomplish their goals while avoiding unnecessary court proceedings and minimizing or eliminating exposure to death taxes.

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